Nationwide set to enter the SME lending market

Nationwide are set to enter the small business lending market after revealing that they have plans to launch a range of services over the next few years. The building society said that they are recognising that small and medium enterprises are an important part of the British economy and that it wants to play a part in helping them.

This is a timely move by Nationwide, just when the UK’s top five banks are under pressure to provide more credit to SMEs that are struggling. Barclays, HSBC, Lloyds, RBS and Santander all agreed with the Government to increase lending to SMEs up to £76bn last year as part of the Project Merlin. They missed the target last year by over £1bn.

Nationwide, on the other hand, increased gross mortgage lending by 44 percent in the year to April. It also had an increase in underlying profit of 10 percent to £304mn. The chief executive of Nationwide, Graham Beale, said that SME lending would be good for the building society but it won’t be happening until next year.

Over 24,000 first-time buyers took out mortgages with Nationwide last year. It is also the second largest savings provider in the UK and sales of personal loans and credit and debit cards went up by 13 percent. It is also in a good position regarding the set-aside charge to cover claims against mis-selling of payment protection insurance. It increased the amount set aside from £16 million to £119 million.

Bad debt charges for the building society were set at £428 million. The improvement in retail lending charges offset any rise in commercial lending. So Nationwide are in a good position overall and has chosen a good time to enter the SME lending market. It is likely that a few SMEs may look to the building society if they are disillusioned with the attitudes of the other main lenders such as the ‘big five’.